Equity Market Insight from Nasdaq MID - December 15 2017

Friday, December 15, 2017, 10:50 AM, EST

• NASDAQ Composite +0.79% Dow +0.60% S&P 500 +0.79% Russell 2000 +1.05%
• NASDAQ Advancers: 1644 Decliners: 615
• Today's Volume (100 day avg) +55.9%

The Dow is the shining star this week having gained about 1.4%, helped by strong gains from Boeing, Goldman Sachs and Disney. At 10:15 this morning US stocks got a boost after a Fox Business reports that Marco Rubio will vote in favor of the Tax bill, adding confidence an agreement will be reached before the end of the year. The shift in sentiment is reflected in the R2K index, which fell 1.1% yesterday on tax bill worries and rallies over 1% so far today as those worries subside. All sectors are in the green with financials (+1.4%) leading after two daily declines. Treasuries are a little weaker as the yield curve flattens, gold is flat, the dollar up slightly as is crude oil.

• Wednesday's pullback in the US Dollar (-0.7%) will likely end the greenback's weekly winning streak . Comments from the Fed sent the DXY Index sharply lower in the afternoon session, as the index was testing its highest level in over a month. The committee pointed towards uncertainty for tax reform passing and a loose plan for the upcoming rate hikes. Investor reaction suggests a dovish tone from the Fed, which may initiate some equity profit-taking to close out 2017.
• November Industrial Production rose 0.2%, less than the 0.3% expected. However October's already strong read of 0.9% was revised higher to 1.2% making October the best month since May 2010. The November gain was driven by a 3% surge in oil & gas production, which return to more normal levels following storm disruptions. Mining activity rose 2%, utility output fell 1.9%, vehicle output rose just 0.1% and business equipment gained 0.5%.
• Today's elevated volume is related the rebalance of the S&P and other indexes, as well as the quarterly quadruple witching event with the expiration of equity index futures & options and single stock futures & options. We'd like to congratulate the Nasdaq 100 additions ASML Holdings , Cadence Design Systems, Synopsys, Take-Two Interactive Solutions and Workday. Also there will also be 54 additions to the Nasdaq Biotechnology Index as that index performs its annual reconstitution.
• Nasdaq welcomes two IPOs that listed today: Newmark Group (NMRK) and Casa Systems (CASA). Newmark priced 20 million shares at $14 and Case priced its offering of 6 million shares at $13.

Technical Take :

The widely followed "yield curve", represented by the spread in 10-yr-2yr Treasuries, has flattened below 53bps and is set to close at its lowest level for 2017. While seemingly this is bad for rate sensitive financials, the pure branch bank lenders are actually more correlated to the "belly" of the curve which is better represented by the 2yr-3month spread. As you can see in the below chart, this spread bottomed in July at 18bps and has now widened to 54bps. This widening has been driven by the 2yr treasury yield which bottomed at 1.25% in September and is on pace to close at a ten year high at its current level of 1.85%. This may explain why the regional bank ETF (KRE) is leading most industries today with a gain of 1.64%.

Please see Nasdaq Revitalize page, where we make recommendations about improvements to the capital markets to promote growth, innovation, job formation and wealth creation. We welcome your feedback on our proposals to reduce burdens on companies with proxy reform, short sale disclosure, and tax, litigation & disclosure reform.

Nasdaq's Market Intelligence Desk (MID) Team includes:

Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.

Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading.

Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.

Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

Annie O'Callaghan is Director on the Market Intelligence Desk (MID) at Nasdaq. Annie has worked for NASDAQ in a variety of roles including support of Nasdaq C-level management in client retention and customer service. Annie also served as a Sales Director in Nasdaq's Transactions Services business. Prior to joining Nasdaq, Annie worked at AX Trading, managing accounts for its Alternative Trading System and served on Credit Suisse's trading desk as an Electronic & Algorithmic Sales Trading Analyst.

Brian Joyce, CMT has 16 years of trading desk experience. Prior to joining Nasdaq Brian executed equity orders and provided trading ideas to institutional clients. He also contributed technical analysis to a fundamental research offering. Brian focuses on helping Nasdaq's Financial, Healthcare and Airline companies among others understand the trading in their stock. Brian is a Chartered Market Technician.

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